Russia imposes major price hike on Ukraine for natural gas

Discount withdrawal means price to rise 43.6% in second quarter

Russia has sharply hiked the price for natural gas to Ukraine today, raising the heat on its cash-strapped government, while Ukrainian police moved to disarm members of a radical nationalist group after a shooting spree in the capital, Kiev.

Alexei Miller, the head of Russia's state-controlled Gazprom natural gas giant, said the company has withdrawn December's discount which put the price of gas at US $268.50 (€194.58) per 1,000 cu m and set the price at $385.50 per 1,000 cu m, up 43.6 per cent, for the second quarter.

The discount was part of a financial lifeline that Russian president Vladimir Putin had offered to Ukraine's president Viktor Yanukovych after his decision to ditch a pact with the European Union in favour of closer ties with Moscow. The move fuelled three months of protests which forced Mr Yanukovych to flee to Russia in February.

Radical nationalist groups played a key role in Mr Yanukovych’s ousting, but they quickly fell out with the new government. Last week, one of the leaders of the most prominent radical group, the Right Sector, was shot dead while resisting police.


Right Sector members then besieged parliament for several hours, breaking windows and demanding the resignation of Ukraine's interior minister Arsen Avakov. They lifted the blockade after politicians set up a panel to investigate the killing.

Late yesterday, a Right Sector member shot and wounded three people outside a restaurant adjacent to Kiev’s main Independence Square, including a deputy city mayor, triggering a stand-off which lasted overnight.

Police surrounded the Dnipro Hotel, which Right Sector had commandeered as its headquarters, demanding that the radicals lay down their weapons and leave.

Mr Avakov said that Right Sector members got into buses this morning, leaving their weapons behind, and headed to a suburban camp under the escort of officers of Ukraine’s Security Service.

Russia has pointed at Right Sector’s actions to push its claim that the new Ukrainian government was kowtowing to nationalist radicals, who threaten Russian-speakers in southeastern Ukraine.

Russia has used the perceived threat from ultranationalists to defend its annexation of Crimea, and has concentrated tens of thousands of troops along its border with Ukraine, drawing western fears of an invasion.

Mr Putin and other officials have said Russia has no intention of invading Ukraine. Defence minister Sergei Shoigu insisted today the Kremlin wants a "political settlement that would take into account interests and rights of the entire Ukrainian people" and had no intention of threatening Ukraine's statehood.

At the same time, Russia has used financial levers to hit Ukraine, which is teetering on the verge of bankruptcy.

Mr Miller, of Gazprom, said the decision to charge a higher price in the second quarter was made because Ukraine has failed to pay off its debt for past supplies, which now stands at $1.7 billion.